It’s that time of year again. The Autumn Statement is here!
Thankfully, we seem to have avoided repeating the events of 2022, where Liz Truss and her chancellor practically broke the UK financial markets temporarily. Phew, what a relief.
With that said, Jeremy Hunt’s Autumn Statement (basically just a budget) was clearly designed as an electioneering tool.
In this post, I’ll give you all the need-to-knows. No fluff, just information. Let’s jump straight in.
Wages, Benefits and Pensions
National Living (& Minimum) Wage
Minimum wage will now encompass everyone over the age of 21 (previously 23 years old).
From April 2024, the new minimum wage rates will be:
- 21 And Over: £11.44 (was £10.42, up 9.8%)
- 18-20 Years Old: £8.60 (was £7.59, up 14.8%)
- 16-17 Years Old: £6.40 (was £5.28, up 21.2%)
- Apprentices: £6.40 (was £5.28, up 21.2%)
Overall Benefit Increase
In April 2024, the majority of benefits and Tax Credits in England and Wales will increase by 6.7%. This is the same as September’s CPI (inflation) reading.
While we don’t currently know exactly which benefits will see this rise, Universal Credit and PIP or other disability benefits are near-guaranteed to make the list.
State Pensions
With the triple-lock remaining in force, more than 12 million pensioners will see their state pension, as well as Pension Credit, increase by 8.5% in April 2023.
This translates to:
- New State Pension: An extra £17.35 per week, if you qualify for the Full State Pension. Increasing from £203.85, to £221.20.
- Old State Pension: An additional £13.30 per week, increasing from £156.20 to £169.50.
Local Housing Allowance (LHA)
Local Housing Allowance (LHA) will rise in April 2024, for the first time in three years.
The allowance will increase to match the 30th percentile for that area. In other words, it will cover the cost up to the cheapest cheapest 30% (i.e., the cheapest third) of homes in the region. It’s expected this will benefit 1.6 million people.
Taxes & Allowances
Income Tax & Personal Allowance
No changes to the Personal Allowance or Income Tax thresholds. The previous freezes will remain in place.
However, from April 2024, the Self Assessment threshold for customers taxed through PAYE only, will change from £100,000 to £150,000.
In other words, those earning between £100,000 and £150,000, who only receive income via PAYE, will no longer need to complete a self-assessment form each year. This saves admin (and money) for both workers in this range, as well as HMRC, who will have fewer self-assessments to review.
National Insurance Contributions (Class 1)
This was the big reveal/surprise in this year’s Autumn Statement.
From 6th January, Employee National Insurance Contributions for Basic Rate tax payers (i.e., those earning between £12,570 and £50,270) will decrease to 10%, from 12%.
It’s worth noting that NI is not devolved, so this will benefit the whole of the UK.
Though this will benefit lower income earners, it will not fully relieve the tax burden caused by freezing the Personal Allowance and Income Tax thresholds.
National Insurance Contributions (Class 2 & 4)
This year’s Autumn Statement also provides a little relief for the self-employed.
Class 2 National Insurance Contributions will be abolished from April 2024.
Also from April 2024, the Class 4 National Insurance Contributions rate will be reduced to 8%, from 9%. This rate is paid on profits between £12,570 and £50,270.
ISA Allowances
While no changes were made to the ISA allowances themselves, there were two important changes in this Autumn Statement:
- Fractional shares will be allowable within ISAs. This will only be relevant to a set group of companies/funds, to be decided via a review.
- From April 2024, it will be possible to open – and contribute to – more than one ISA per year.
Public Spending
Alcohol Duty
Jeremy Hunt announced that he will freeze alcohol duty until 1st August 2024.
Though, this does come after the largest duty rise in nearly 50 years, so this decision makes sense.
Tobacco Duty
Tobacco duty will increase for hand-rolling tobacco, starting immediately. Well, from 6pm on 22th November 2023 (today).
The duty will increase by RPI, plus 12%. This means an increase of almost 20%.
Value Added Tax (VAT)
The Chancellor announced that the zero VAT rate on women’s sanitary products will include period underwear, from January 2024.
Capital Allowance
In a win for businesses, the government announced that it will make full-expensive a permanent feature in the UK tax system.
This is a huge tax cut for UK business, and is expected to boost investment across the country.
Mortgage Guarantee Scheme
The Mortgage Guarantee Scheme will be extended until the end of June 2025. This will be a relief for both banks and home buyers, maintaining a healthy supply of 5% mortgages.
What Was Missing?
There we have it. That’s my rundown of the most important announcements in this year’s Autumn Statement.
But, what didn’t Jeremy Hunt mention today, that were either expected, or much requested/campaigned for?
Here’s a quick breakdown:
- Tax: The tax thresholds remain frozen until 2028 despite much lobbying to unfreeze them. Freezing the Personal Allowance and the NI/Income Tax bands creates what is known as “fiscal drag”. This is a “stealth tax”, rather than direct taxation. Essentially, because the Personal Allowance is frozen, but wages are increasing, those who currently don’t pay tax/NI, will eventually fall under that tax bracket. This is the same for those earning, say £45,000 today; in a few years, their wage will likely go beyond the 40% bracket, meaning they pay more tax.
- ISAs: The ISA allowances were not increased, contrary to rumours that the yearly limit would increase to £30,000. Disappointingly, there were also no announcements regarding the Lifetime ISA. In particular, Martin Lewis from MoneySavingExpert has campaigned heavily to remove the Lifetime ISA penalty. Martin has also campaigned for an inflation-matching increase to the house price limit for the LISA; currently at £450,000. Despite houses being 33% more expensive than when the LISA was introduced, this remained unchanged today.
- Inheritance Tax: It was rumoured that IHT was to increase. However, this did not come to light today, to much surprise. IHT is often seen as a winner among Conservative voters.
If you’d like to hear Martin’s take on the Autumn Statement, you can read his breakdown here.
What are your thoughts on this year’s Autumn Statement? Will you benefit from these changes? Let me know in the comments!
